Abstract
We document a positive ESG premium among stocks with a low degree of socially-motivated investor ownership. We show that a theory of sustainable investing with heterogeneous skill and sustainability sentiment can explain this finding. In support of this explanation, we find in the cross-section that a low degree of socially-motivated ownership leads to future ESG score increases. The premium amongst low degree of socially-motivated ownership is stronger during periods of high climate sentiment and risk aversion as in the crisis.
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